Chapter 7 Study GuideName:____________________Prd:____7.1Key Terms:Market structure– important features of a market, including the number of buyers and sellers, productuniformity across sellers, ease of entering the market, as well as forms of comptetitonperfect competition– a market structure with many fully informed buyers and sellers of an identicalproduct and ease of entrycommodity– a product that is identical across sellers, such as a bushel of wheatmonopoly– the sole supplier of a product with no close substitutesmarket power– the ability of a firm to raise its price without losing all sales to rivalsbarriers to entry– restrictions on the entry of new firms into an industryThinking Critically:1.What characteristics of farms suggest that these firms operate in perfectly competitive markets?
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2.One decade ago, the town of Mt. Utopia had five fast-food restaurants. The town’s populationhas grown rapidly since then. As the town grew, the sales and profits of these restaurantsincreased. There now are 15 fast-food restaurants in Mt. Utopia. None of them earns a largeprofit. What feature of competitive markets does this demonstrate? Explain your answer.
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3.Identify a firm that operates in your community that you think has a significant amount ofmarket power. Explain you chose this firm?
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4.At one time American Telephone and Telegraph Corp. (AT&T) had a great deal of monopolypower and earned large profits. The growth in the use of cellular technology caused AT&T to losemoney. What happened to AT&T’s monopoly?
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Graphing Exercise:5. Use data in the table to draw two graphs: the market demand and supply curves, and the individualdemand curve for Apex Coal Mine. Assume this is a perfectly competitive market, and that Apex is onefirm in that market. What is the market equilibrium price? How did you derive the individual demandcurve for Apex?
